Beware the R Word

The haircut taken by investors in the US this week was largely the result of growing fears that a recession is around the corner. October is a month that tends to be like that….we often see corrections and the like at this time of year.

Then there was the latest GDP data for Canada. It too had an ominous hint of the R word finding its way back into the conversation.

Recessions are more technical than anything but they have a big psychological effect on investors are always looking for an excuse to sell en masse which pushes prices downward. In economist speak, a recession is when we see the economy contract or shrink for two consecutive quarters. So when July’s GDPO figures came out showing zero growth eyebrows were raised.

This follows a growth month June which had reversed a negative string. Basically, June stopped the clock and we got a reset. But when July didn’t not sustain the growth worriers quickly outnumbered the optimists as the clock has been restarted on the negative track.